What’s up traders!

What a month March has been! To basketball fans, March Madness has a different meaning but traders have been dealing with some madness of their own lately. It’s been a wild 17 days of March even without including the previous month’s volatility in the markets. It does appear as though the market may have found a four-leaf-clover on St. Patrick’s Day as it tries to clear key levels of resistance.  It is challenging to trade in these types of markets. Especially if you were caught off guard or if you haven’t traded in this type of condition. When the going gets tough, the natural reaction is to jump ship or sit on the sidelines. Though that might be the right response for a few, it is not always the best approach. When you throw in the towel, you are eliminating any chance to recover back some of those losses you might have suffered through. Now, if you don’t have a plan or if your only plan is to double up to catch up, we need to work on that.

Look at your trading the same way you would a business. This is just a season of your trading business that you are in the red. Businesses go through slow and peak seasons all the time. We know this and understand this for many businesses out there. They don’t close their doors in down times they remain open even though revenue isn’t coming in as usual. The same is true for us traders, we do not shut down, we adjust.

Even though volatility creates challenging times, there are ways we can still participate. For cash flow traders it means selling lower deltas and for those long-term investments selling covered calls as fast as that theta decays on those calls. Remember, increasing volatility increases the premiums so if you are a seller of options, a lower delta than you are used to selling will still get you some fairly nice cash flow. The price movement on the market this week has been strong, but we are not out of the clear. Keep your trading simple. Look for strength in sectors, XLE anyone? Find easy to recognize patterns. Stocks have taken a beating recently, look for reversal patterns. Slowing momentum, potential breakouts, and multiple times of support being tested and holding. I find it easier to look at a CLEAN chart. Meaning no indicators like moving averages or trend lines etc. Are you able to identify support and resistance without them? If swing trading can you easily implement the S.T.E.P System rules?

Here’s an example of AMX from this week’s Stock Report.

This is a clean chart with no indicators. Price lines indicate support and where to place stop-loss, entry, and target levels. Here’s an example of AMX from this week’s Stock Report.

This is a clean chart with no indicators. Drawn lines indicate support and where to place stop-loss, entry, and target levels.

This chart has moving averages that will help confirm the technical pattern you are looking at.  The stock broke out of a key resistance level that had been tested a few times. That level is also where the falling 50 SMA is sitting and on the breakout candle, the 9-day crossing the 50-day, and the stock closed above the 50 SMA. Support holds at the 9-day and finally, previous levels of resistance are target 1 and 2.

This is a low-priced stock ideal with a good risk to reward ratio on easy to identify and execute from technicals. As good as this setup is, anything can happen to ruin it. One was to minimize risk is lower position size. Reduce the number of shares to trade. If according to your risk tolerance you’d buy 80 shares based on risking $100 per trade, buy 40 shares instead to minimize the risk and still be able to trade confidently and stay the course.

Ladies, tonight is our monthly Women in Trading webinar. Join me tonight at 8:30 PM EST. See you there and invite a friend!

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